CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data. *Availability subject to regulation.
Commodity Trading is the trading of a physical product that is typically bought and sold in an established financial exchange. Commodity trading can be a popular choice for traders because of the potentially increased returns (with the subsequently increased risks) offered by the high leverage usually associated with commodities.
These higher levels of leverage, coupled with the use of margin deposits where the broker essentially lends the trader the remaining portion of the actual commodity value, means a trader can make multiples of his investment if the commodity price moves in a favourable direction. These margin deposits will then usually be charged an overnight financing charge. For example, popular CFD broker City Index will charge an overnight fee +/– 2.5% annual charge above or below the relevant base rate
However, it is important to remember that the opposite is also true that if the market moves against the trader then their losses can be much more magnified.
1. A trader buys a commodities futures contract for gold, where the cost per ounce of gold is $1,000.
2. They agree to 2 contracts at a weight of 100 ounces per contract.
3. The full contract cost therefore totals $200,000 ($1,000 x 2 x 100).
4. The trader makes a margin deposit of 6% which totals $12,000 (0.06 x 1,000 x 2 x 100).
5. The broker is therefore technically lending them the difference of $188,000.
6. The price of gold then increases by 1% to $1010 per ounce.
7. The trader’s profit will therefore be $2000 ($1010 x 100 x 2 = $202,000 – $200,000).
8. The trader’s return on their investment will total 16.67% (2000/12000).
So, with an account balance of $12,000, the trader will have made a profit of $2000 (16.67%) with just a 1% price increase in the commodity.
However, it is important to note that if the price had fallen by the same amount, the trader would have made a loss of 16.67%, with the commodity having only suffered a 1% fall in price.
Commodities can typically be traded on the futures market through futures contracts, which are short term contracts with definite expiry dates. However, commodities may also be traded indirectly through the equities market, through mutual funds, through exchange-traded funds (ETFs) or through a contract for difference (CFD) trading platform.
Leverage and smaller contract sizes are two factors that attract traders to trading futures contracts as CFDs (contracts for difference) rather than traditional trading. With a combination of smaller contracts and leverage, the initial capital requirements for traders is significantly lower.
Unlike manufacturers, most traders do not want the actual delivery of the commodity they are trading, therefore a commodities trader will usually opt to roll-over the futures contract for that commodity. A commodities roll-over effectively extends the expiration date for the settlement of the contract, allowing the trader to avoid the costs associated with the settlement of an expired futures contract.
Forex.com scored best in our review of the top brokers for commodity , which takes into account 120+ factors across eight categories. Here are some areas where Forex.com scored highly in:
Forex.com offers one way to tradeForex . If you wanted to trade GOLD
The two most important categories in our rating system are the cost of trading and the broker’s trust score. To calculate a broker’s trust score, we take into account a range of factors, including their regulation history, years in business, liquidity provider etc.
Forex.com have a AAA trust score . This is largely down to them being regulated by Financial Conduct Authority, segregating client funds, being segregating client funds, being established for over 19
|Regulated by||Financial Conduct Authority|
|Uses tier 1 banks|
|Segregates client funds|
Want to see how Forex.com? We’ve compared their spreads, features, and key information below.
|Gold spreads from||0.3|
|Silver spreads from||0.61|
|Copper spreads from||7.0|
|Crude Oil spreads from||5.0|
|Natural gas spreads from||8.0||DAX Spread||250.0|
|FTSE 100 Spread||150.0|
|Platform||MT4, Web Trader, NinjaTrader, Tablet & Mobile apps|
|Base currency options||USD, GBP, EUR|
|Funding options||Bank transfer, Cheque, DebitCard,|